Market situation – container flows – update X

Asia

Following weeks of lower productivity, caused by a COVID-19 outbreak in the Shenzhen area, the Yantian International Container Terminal (YICT) has returned to normal operations. Nonetheless, the massive backlog of containers stranded at the port will take weeks to clear.

Due to the lower productivity in Yantian, and consequent increased congestion, hundreds of vessels missed their calls through the first half of June. In turn, this has caused a growing backlog of loaded containers in the Yantian area that will also take many weeks to resolve. 298 container ships with a combined capacity of over 3 million TEU skipped Yantian between June 1 and 15 (source: joc.com). These containers will now get slowly positioned from local transhipment hubs.

The congestion in the traditional transhipment ports (e.g., Singapore, Port Kelang) is not easing either. Several shipping lines have stopped offering port pairs that are routed via these transshipment ports. They are temporarily not calling at these ports to prevent additional delays, and because of the massive container stack awaiting further transport it is no use to keep on piling the cargo up.

With the yearly summer peak volumes ahead of us, the shipping lines are curtailing allocation agreements where they can. The ongoing pressure on the capacity out of China is pushing rates to unprecedented levels out of the entire Asian region. Every time the market thinks the maximum level is reached, the next week the rates go up again.

North Africa

Important Notification – Egypt

As per the communication received from the Egypt Ministry of Finance in reference to Decision No. 328 of 2021, amending some provisions of Resolution No. 38 of 2021, the implementation of the Advance Cargo Information Declaration (ACID) is being delayed by three months. The regulations are now scheduled to come into force on October 1, 2021, instead of the earlier announced date of July 1, 2021.

Europe

As mentioned in an earlier blog post, the Port of Hamburg is heavily affected by congested terminals, causing shipping lines to divert their vessels to other ports. The congestion is however expanding to other European ports due to poor schedule reliability, with delays in vessel handling. This is forcing carriers to temporarily cut certain key ports out of their Europe rotations in an attempt to uphold weekly schedules. The affected ports are Rotterdam, Hamburg, and Le Havre. Le Havre will suffer a lot due to multiple shipping lines deciding to cancel services to and from this northern French port for the next months. Also, Rotterdam will be skipped on several Far East slings from different alliances. THE alliance has taken the most far-reaching action by skipping Rotterdam on one of their major services for 7 weeks in a row. (THE Alliance consists of Hapag-Lloyd, ONE, Yang Ming, and Hyundai).

No vessel calls means no import volumes in the port, and thus fewer empty containers to use for export. Containers destined for export will need to be delivered to other ports. Most of the volumes will go through the Port of Antwerp. The local terminals and shipping lines are concerned that this increase in cargo will create a similar gridlock in Antwerp.

North America

If you have read the past blog posts or if you have consulted other sources of information, you will be aware that the massive backlog of containers in the U.S. ports is not getting resolved soon. Where we saw a slight decrease in volumes on the West Coast, the summer months are traditionally the peak period for volumes moving ex Asia to the U.S. During the summer months, products linked to the holiday season (Christmas decorations, etc.) are getting imported. This is already resulting in even higher rates on the spot market. To benefit from these high rates, MSC and Maersk have both announced a stand-alone service (so apart from the 2M alliance) on the Transpacific route to accommodate these volumes. The fact that a lack of containers in Asia is actually the main driver for the rate increases seems to have been forgotten.

To aggravate the situation even more, the heatwave which is hitting Canada and the northern part of the U.S. has caused several terminals to close due to record-breaking heat, to safeguard workers' health and safety.'

On the East Coast, discussions are ongoing to accept the return of containers to the Port of New York & New Jersey. The fact that empties are no longer allowed to be dropped at the port is causing even fewer truckers to be available in the port area to pick up loaded containers, only adding to the problem of full quays, which the authorities had hoped to ease by not allowing the return of empty containers.

With the situation around the inland logistics not getting resolved any time soon, the major shipping lines are withdrawing their agreements for CY-DOOR movements that were in place. Either they are simply stopping offering it or they are asking for an additional charge so they can procure inland transportation at higher rates than agreed. Either way, the shipping lines are increasingly refraining from assisting with inland logistics, and do not want to be involved with or blamed for high costs that occur in the ports due to having idle containers on the quay awaiting a transport connection by truck or rail.

General

Without any clear signs that the current situation in container logistics will improve, Drewry has estimated that the container carriers will be able to report a profit close to 100 billion dollars in 2021 alone. In contrast to the record-breaking rates today, the service level given by the shipping lines is at an all-time low. Schedule reliability has never been so poor, and the ongoing equipment shortages keep on proving to be a massive hurdle in terms of managing a reasonable or predictable supply chain.

The delays at terminals and ports, like the container shortages in certain areas, are not solely caused by the shipping lines. However, the fact that few actions are taken to evacuate containers from/to suffering areas and few attempts are made to stabilize sailing schedules is surely down to the shipping lines. In the words of Winston Churchill, "never waste a good crisis": the shipping lines are benefiting from the ongoing chaos, and they have little to no sense of urgency around getting this situation resolved. To take away any doubt, the stock price of Asian-based carriers Yang Ming and Evergreen sky-rocketed in the past 12 months, by 2732% and 1716%, respectively. The below image from Drewry also gives a very clear comparison of the premiums that are being paid today ex Asia. The graph compares the premiums paid on average in the past 5 years to cover peak seasons. (These values are based on 40’ containers and are in USD). These amounts only represent the premiums, not even considering the already higher basic ocean freight of today ex Asia.